May 5 The Oil Sands Weekly

Syncrude resumes crude shipments . . .

Crude shipments from Syncrude's Mildred Lakeresumed this week, estimated at 140,000 bbl/day. Suncor says production is expected to ramp up over the next month as turnaround activities are completed.

Mildred Lake has a production capacity of 350,000 bbl/day of upgraded crude. The facility is expected to return to normal operation sometime in June. After peaking at US$5/bbl in mid-March, the WTI discount to Syncrude Synthetic Crude has now shrunk to about US$2.

A blow-out quarter for Jackfish . . .

Heavy oil production out of Devon Energy's Jackfish SAGD operation averaged 125,100 bbl/day in the first quarter of this year, about 20% higher than the plant's official nameplate capacity and 23% higher than Q1/2016.

Jackfish 3 will undergo a 21-day maintenance shutdown in June, cutting average production by 15,000 bbl/day in the second quarter. As a result, Q2 guidance was reduced to a range of 120,000 to 125,000 bbl/day.

The company’s 2017 capital program will be focused on adding new well pads, which should increase output next year. Excluding hedging programs, bitumen realization prices averaged US$26.30 a barrel.

Cash flow from Devon's Canadian operations is expected to increase 60% this year versus 2016. Jackfish now accounts for almost 50% of Devon's total oil production.

CNRL delivers a solid Q1, shareholders not impressed . . .

Canadian Natural Resources (CNRL) reported a first quarter profit of $245 million, much improved from a loss of $105 million for the same time last year. Funds from operations were reported at $1.639 billion, exceeding capital expenditures by $800 million. Over $500 million of that amount was put towards debt reduction.

Total production expanded 4% annually to 876,907 boe/day. Natural gas production declined 6% y/y to 1.673 Bcf/day while liquids production increased 9% to 598,113 bbl/day on higher output from the company's oil sands operations.

The Horizon Mine achieved record Q1 production of 192,491 bbl/day of upgraded synthetic crude (SCO), 8% higher than the previous quarter and 50% higher than Q1/2016. Operating costs at the oil sands facility declined 17% y/y to $22.08/bbl of SCO. Horizon's annual production guidance was left unchanged at 170,000 to 184,000 bbl/day of SCO. The facility will undergo a 24 day shutdown in the fall to tie-in Phase 3 equipment.

CNRL's thermal in-situ facilities produced 128,372 bbl/day in Q1, down slightly from the previous quarter. Kirby South produced 37,311 bbl/day in Q1, up 8% y/y while Primrose produced 91,061 bbl/day in Q1, up 9% y/y. Total thermal in-situ production is expected to average 105,000 to 115,000 bbl/day this year, reflecting planned shutdowns at both facilities later this year.

Despite the strong Q1 results, earnings, cash flow and production were all slightly below analysts' expectations. By the end of the first quarter, the company's debt-to-book ratio was reported at 38%.

The company says it has not drilled any new well pairs at Lindberg in the past two years, which will adversely impact production until the Phase One optimization program comes online later this year.

First quarter revenues increased 186% to $37.2 million at Blackpearl Resources as net income rose to $7.8 million:

Funds from operations more than tripled to $12.9 million. Total production averaged 10,753 boe/day, almost all liquids.

The company's Blackrod SAGD pilot has averaged 550 bbl/day over the past 2 years with a steam-to-oil ratio of less than 3.

President John Festival says construction of Phase 2 at Onion Lake is progressing well with module construction over 50% complete. Phase 2 has a production capacity of 6,000 bbl/day and should begin steaming in the middle of next year.

Athabasca Oil Corpreported a 72% jump in Q1 production on its recent acquisition of operating assets from Statoil. Net losses for the quarter narrowed to $29.2 million:

Production averaged 26,737 boe/day for the quarter, weighted 95% liquids.

Hangingstone is expected to undergo a planned maintenance turnaround sometime this spring which will crimp production in Q2. However, the facility is expected to reach its nameplate capacity of 12,000 bbl/day sometime next year.

Capital expenditures for the company's thermal assets was reduced by $30 million to $75 million, split $54 million at Leismer, $15 million at Hangingstone and $6 million for long dated thermal leases.

Thermal production guidance for 2017 remains unchanged at 29,000 to 32,500 bbl/day.

A made in Canada plan for TMEP . . .

UK-based EVRAZhas struck a deal with Kinder Morgan to supply about 800 km of pipe for the Trans Mountain Expansion Project (TMEP). The deal represents about 75% of the total length of pipe needed for the whole project.

About 250,000 tons of steel will be sourced from EVRAZ’s recycled metal operations in Alberta, Saskatchewan, Manitoba and Ontario. The pipe will be manufactured at the company's Regina mill.

The deal is contingent on a positive final investment decision from Kinder Morgan's board. Last week, the company announced it will IPO its Canadian subsidiary in order to fund the $7.4 billion expansion, which runs 1,150 km from Edmonton to the Port of Vancouver. Construction is schedule to begin sometime this fall. The expanded line should be in-service by the end of 2019.

Kinder Morgan says more details of its procurement plans will be released as the project progresses.

Pembina and Veresen team up in $9.7B merger . . .

Yet another merger was announced in the midstream sector this week, this time between Pembina Pipeline and Veresen. Under terms of the agreement, Veresen shareholders will receive $4.8494 in cash and 0.3172 Pembina shares for each Veresen share held. The offer represents a 20% premium to Veresen's share prices pre-announcement.

The combined company will have 5.8 Bcf/day of processing infrastructure in place by the end of 2018 and 3 million boe/day of pipeline capacity.

Pembina says it expects to save $75 to $100 million annually in overhead and operating costs. The "new" Pembina will have an enterprise value of $33 billion, making it Canada's third largest midstream company behind Enbridge (valued at $91 billion) and TransCanada ($55 billion).

2016 actually worse than 2015 for Albertans . . .

Despite an increase in oil and gas extraction, Alberta's GDP contracted 3.8% in 2016, making it the worst performing province for the year. The 2016 recession follows a 3.7% contraction in 2015. The last two consecutive annual contractions in Alberta were in 1982 and 1983.

Despite the May wildfires and maintenance shutdowns at several upgraders, bitumen extraction increased 1.0%. Conventional oil extraction also edged up 0.2%. However, a big drop in capital spending for the energy sector caused a sizeable decline in engineering construction, oil & gas services, manufacturing and wholesale trade of machinery and equipment.

Residential construction also contracted 20% as more Albertans left the province. Housing starts were the lowest since 1997. Chemicals manufacturing was a rare bright spot, increasing 7.8%.

Saskatchewan was the only other province to experience a recession in 2016. GDP contracted 1.0% after falling 1.3% the previous year. NewfoundlandandLabrador emerged from recession in 2016, expanding 1.9% on higher output from the Hibernia oilfield and ongoing construction of its $11.7 billion Muskrat Falls hydroelectric power project.

One year ago this week . . .

The City of FortMcMurraycommemorated the one year anniversary of the Wood Buffalo wildfires and evacuations this week. The fire, nicknamed "The Beast" destroyed 1,900 structures, forcing 90,000 people to flee the city. Fort McMurray's population has dropped by 12,000 since last year, partly blamed on lower oil prices.

Both the province and the city have promised to complete a review of events leading to the wildfires and the way evacuations were handled. The northern Alberta wildfires turned out to be the most costly natural disaster in Canadian history, resulting in about $3.7 billion in insured damages.

BC election weighs heavily on Alberta's NDP . . .

All eyes are on the upcoming provincial election in BC next week. Latest polls show the ruling Liberals in a close tie with BC's NDP.

NDP leader John Horgan is staunchly opposed to Kinder Morgan's Trans Mountain Expansion, calling the project "not in BC's interest" and promising to "use every tool in [his] toolbox to stop the project from going ahead." It is unclear what power the new government would have to pull existing permits and licences.

Alberta Premier Rachel Notley has barred members of her own party from supporting the BC NDP.

In a bizarre twist, activist Tzeporah Berman has thrown her support behind BC's NDP due to their "excellent policies" on environmental issues, warning voters not to vote for the Green Party for fears of splitting the left-leaning votes.

Berman is a former co-director at Greenpeace, former co-founder of ForestEthics and was appointed Co-Chair of the province's Oil Sands Advisory Group, funded by Alberta taxpayers. The self-described environmentalist is anti-pipelines and once compared the oil sands to Lord of the Ring's barren wasteland of darkness and fire.

This week's other Canadian energy news . . .

ConocoPhillips announced 300 layoffs this week, concentrated mostly in its Calgary head office. Spokesperson Rob Evans says the staff cuts was "to match the reduced size of the business." ConocoPhillips recently sold its 50% stake in the Christina Lake and Foster Creek to partner Cenovus but remains operator of the Surmont SAGD facility, owned jointly with Total.

CNRL has applied for the transfer of licences and approvals for the Muskeg River and Jackpine mines from Shell Canada, required as part of its recent purchase of Shell's stake in the Albian Sands project. CNRL will take-over operation of both Muskeg River and Jackpine as part of the deal. CNRL CEO Steve Laut also reassured employees this week that the acquisition will not result in any layoffs.

TransCanada CEO Russ Girlingprovided an update on the Keystone XL pipeline this week. State-level approvals for the cross-border project currently sit with the Nebraska Public Service Commission. A hearing is scheduled for August with a decision expected by the end of November. Giring says the company is also in the process of updating shipping commitments on the line. The CEO does not expect capital costs to rise for Keystone XL. If anything, Girling says costs might be slightly lower than previous estimates.

Rotterdam-based Vopakhas agreed to take a 30% interest in AltaGas' Ridley Island Propane Export Terminal (RIPET), located in Prince Rupert, BC. RIPET will be Canada's the first propane export facility off the country's west coast. The project is to be designed to ship 1.2 million tonnes/year of propane from BC and Alberta to customers in Asia. The facility is expected to be commissioned in the first quarter of 2019. Financial terms of the deal were not disclosed.

This week's notable asset sales . . .

Calgary-based Trilogy Energyannounced the sale of various assets in Grande Prairie for $50 million. The divestitures include 44,427 acres of mineral rights in the Valhalla area producing about 1,100 boe/day, weighted 16% liquids. The deal in contingent on approval by the Alberta Energy Regulator (AER). Proceeds from the sale will be used to reduce debt.

Paramount Resources also announced the sale of assets in the Valhalla region for $150 million. The divested volumes produce about 1,400 boe/day and are also subject to approval from the AER.

TransCanadahas dropped down its 49.3% interest in the Iroquois Gas Transmission System and 11.8% interest in Portland Natural Gas Transmission System to its master limited partnership (MLP) TC PipeLines for US$597 million in cash and the assumption of US$168 million in debt. Proceeds from the sale will be used to fund TransCanada's capital program. TC Pipelines is a US-based indirect wholly-owned subsidiary of TransCanada.

Royal Dutch Shellalso announced the dropdown of its 100% interest in the Refinery Gas Pipelines, Delta Pipeline and Na Kika Pipeline to its US-based MLP Shell Midstream Partners for US$630 million.

Noble Energyannounced the sale of its upstream assets in northern West Virginia and southern Pennsylvania to an undisclosed buyer for US$1.225 billion. The divestitures produce about 415 MMcf/day of natural gas equivalent (weighted 88% natural gas) and approximately 385,000 acres of land.

Devon Energyannounced plans to divest US$1 billion worth of upstream assets over the next 18 months, primarily in its non-core properties located in the Texas Barnett Shale. The company says it will redirect the funds to its STACK and Delaware Basin properties. Devon also announced the sale of midstream assets in its Wyoming’s Powder River Basin this week to a subsidiary of Meritage Midstream for an undisclosed amount.

This week's other US energy news . . .

The US Chemical Safety Board (CSB) has concluded that a 2015 explosion at ExxonMobil's Torrance Refinery in California was preventable. The blast injured 4 workers and crippled refinery production for a year, causing a spike in state gas prices. The explosion occurred when hydrocarbons back-flowed through an idled fluidic catalytic cracking unit and into an electrostatic precipitator. The CSB found that there were multiple gaps in the refinery’s process safety management and that the unit was "operating without proper procedures." The refinery was sold to PBF Energy in July of last year. The Torrance refinery has suffered multiple mishaps over the past two years and has been the subject of much public scrutiny.

Magellan Midstream Partnersis evaluating a new pipeline to transport crude and condensate from the Permian Basin to Corpus Christi, Texas. The company also wants to expand its 300,000 bbl/day BridgeTex crude pipeline, which runs from the Permian to the Houston area, to 475,000 bbl/day. The Permian is the largest and fastest growing shale oil basin in the US, now accounting for one-quarter of total US output.

Four Republican Senators from the Midwestare pushing for higher ethanol blending volumes in summer months in exchange for their vote to repeal Obama's methane emissions reduction regulations. Ethanol content in gasoline is capped at 10% during summer months in regions where smog is a problem. In 2014, scientists in Brazildiscovered that ethanol in gasoline raises ozone levels, which contributes to smog.

Various energy infrastructureprojects are stalled as regulators await nominees to fill key positions within the Federal Energy Regulatory Commission (FERC). Projects still waiting for federal clearance include Nexus natural gas pipeline, TransCanada's WB Express, the PennEast Pipeline, Mountain Valley and the Eastern Shore Expansion Project. FERC commissioners are appointed by the White House and must be confirmed by the US Senate. Bloomberg estimates US$50 billion worth of projects are currently stuck in limbo.

The US Administrationis floating the idea of raising the federal gas tax to pay for infrastructure projects. The gas tax hasn't been increased in more than 20 years. The current levy is US$0.184 a gallon on retail gasoline and US$0.244 a gallon for diesel.

Around the world this week . . .

Paris-based Totalannounced plans for deepwater exploration off the coast of Senegal. The deal includes a production sharing agreement for the Rufisque Offshore Profond with Total as the operator. The French energy major holds a 90% interest in the project, with the government of Senegal (Petrosen) holding the remaining 10%. Total has been operating in the West African country since 1947.

German car maker Volkswagen (VW) is reportedly in talks with ExxonMobil and Gazprom to help promote natural gas-powered automobiles. VW CEO Matthias Mueller says his company is "trying to think out of the box" in order to reduce CO2 emission from its fleet.

Columbia's state-owned Ecopetrolannounced the discovery of a gas field in the Caribbean Sea. The government says this discovery "opens the possibility for Colombia to develop a cluster specialized in gas production" which could potentially allow the country to become energy independent. The field is jointly owned with US-based Anadarko Petroleum. This is Columbia's largest gas discovery in 28 years.

The government of Nigeriahas made an initial payment of US$400 million as part of its efforts to repay US$5.1 billion in debt owed to the world's largest oil majors. Late last year, Nigeria signed an agreement with Shell, ExxonMobil, Chevron, Total and Eni that allows the companies to independently source funds for joint-ventures, rather than lending the Nigerian government their portion of expenditures. Nigeria's state-owned NNPC retains on average a 57% stake in all oil and gas ventures in the country. The government hopes the new funding arrangement will help the country restore output to 2.2 million bbl/day, up from its current production of 1.9 million.

BPconfirmed plans to start-up eight projects this year, the largest annual number in its history. The company wants to add 800,000 bbl/day of new production by the end of 2019. BP says all projects are ahead of schedule and 15% below budget on average. The UK oil major also said it wants to divest another US$4.5 to $5.5 billion in assets sometime in the second half of this year.

Yet another activist shareholder is lobbying Australian mining giant BHP Billiton to divest its US shale asset. Sydney-based Tribeca Investment Partners is also demanding the resignation of CEO Andrew Mackenzie. Last month, Elliott Capital also sent BHP's Board a list of "suggestions" to improve shareholder value, including spinning off its entire US oil business. Although a good portion of the company's revenues come from its oil & gas operations, some investors view the sector as a capital-hog. Tribeca estimates BHP's US shale division could be worth US$10 billion. Mackenzie defended his company's investment in the energy sector, noting that BHP is one of the lowest-cost operators in the US.

Total and Italy's Erg are close to finding a buyer for their jointly-owned 2,600 TotalErg Italian retail gas stations. The JV also holds several Sarpom refineries, operated by ExxonMobil's Esso division. Interested buyers includes Italian refiner API Anonima Petroli, Glencore and TRC Capital.

Canadian Natural Resources confirmed plans to begin decommissioning and eventually abandon its Ninian North platform in the North Sea beginning this June. The Ninian field contains three fixed platforms, located 386 km north of Aberdeen, Scotland.

WEEKLY ENERGY STATISTICS

US IMPORTS OF CANADIAN CRUDE

million bbl/day  preliminary data by EIA

US OIL INVENTORIES

million bbls  data by EIA

US OIL PROD'N & RIG COUNT

million bbl/day  data by EIA & Baker Hughes

3,400k

-7k ▼ 0.2%BBL/D CDN EXPORTS TO US

9,293k

+28k ▲ 0.3%BBL/D US PROD'N

527.77M

-0.93M ▼ 0.2%BBL US INVENTORIES

703

+6 ▲ 0.9%US RIG COUNT

CHANGE WK/WK

According to the Alberta Energy Regulator (AER), Alberta produced a near-record 3.3 million bbl/day of crude oil and condensate in February of this year. The province exportedexported a record 3 million bbl/day to the US in the same month.

The US added another 6 oil rigs this week, bringing the total count to 703, the highest since April 2015. Canada added 3 oil rigs, now totalling 27, while the number of gas rigs declined by 6 to 55.

This week's chatter from OPEC and friends . . .

Russia's Energy Minister Alexander Novak claims the country has reduced output by 300,790 bbl/day by May 1st, relative to October's output. The volumes exceed Russia's commitment to cut 300,000 bbl/day. Novak declined to confirm whether Russia will agree to extend its cuts to the end of the year.

Rival factions in Libyahave begun discussions for a power-sharing agreement that may help the country ramp-up oil production and resume exports. Prior to its 2011 civil war, Libya produced 1.6 million bbl/day, more than double the current output. Libya holds Africa's largest oil reserves.

Increases in Angola and Nigeria were offset by declines from Libya and Iraq.

Saudi Arabia averaged 9.97 million bbl/day in April, well below its quota of 10.058 million.

Iraq remains the least compliant OPEC member, still 9,000 bbl/day higher than its agreed production ceiling.

Angola saw new production come online in its offshore East Hub development. April output gained 80,000 bbl/day to 1.68 million bbl/day.

Nigeria completed a maintenance turnaround at its Bonga field in April, allowing production to rise.

Saudi Energy Minister Khalid al-Falih says OPEC members largely agree an extension of production cuts is required in order to bring global oil inventories meaningfully lower. However, members disagree on the duration of the pact and whether Libya, Nigeria and Iran should again be granted exemptions.

US oil production has increased 600,000 bbl/day since OPEC announced their agreement to take 1.8 million bbl/day off the market last November. The next meeting of OPEC and non-OPEC members is scheduled for May 25 in Vienna.

WEEKLY MARKET SUMMARY

CURRENCIES  WEEKLY CLOSE

Friday close  data by Bank of Canada & ICE

98.53

-0.37 ▼ 0.4%USD INDEX

72.93

-0.27 ▼ 0.4%CDN DOLLAR

2.36%

+0.07 ▲ 3.1%US 10Y Bond

1.54%

+0.00 ▲ 0.0%CDN 10Y Bond

CHANGE WK/WK

The Euro was once again the big winner this week, gaining another 1% for the week on expectations of a Macron victory in the upcoming French election. Since mid-April, the Euro has risen over 3.5%.

StatsCan also noted that 2016 is the first year in Canadian history where people over 65 outnumber children under 14. Eastern provinces tend to have older populations whereas Western Canada have more young people.

Notable US economic news . . .

In contrast, the US economy added 211,000 jobs in April, much higher than expected. The national unemployment rate is now 4.4%, the lowest since May 2007.

The US Federal Reserveconfirmed plans to sell US$62 billion in bonds next week. The Treasury also says it is evaluating the cost and benefits of issuing ultra-long duration bonds (greater than 30 years) to help fund US debt. The chances of a June rate hike has now increased to 97.5%.

OIL PRICES  WEEKLY CLOSE

Friday close, USD/bbl  data by CME Group

49.10

-2.63 ▼ 5.1%BRENT USD/BBL

46.22

-3.11 ▼ 6.3%WTI USD/BBL

43.83

-3.60 ▼ 7.6%CDN LT USD/BBL

36.71

-3.37 ▼ 8.4%WCS USD/BBL

CHANGE WK/WK

Brent dropped below US$50/bbl this week while WTI broke below US$45 on Thursday, before rebounding slightly on Friday. The decline was likely due to unwinding of long positions as prices break below key technical support levels. Oil prices now sit near a 5-month low.

US gasoline demand has been softer than expected blamed on higher prices at the pump. Markets are also rattled by lower than expected consumption in China. Wholesale gasoline prices declined over 2% this week, now 15% lower than the highs of last April.

In fact, most other commodities, including gold, iron ore and copper moved decidedly lower this week as money continues to rotate out of commodities and into equity markets. The CRB Commodity Index ended the week 2% lower.

ENERGY SECTOR PERFORMANCE

Friday close  data by TSX & NYSE

CANADIAN & US EQUITIES

Friday close  data by TSX & NYSE

SECTOR SUMMARY

Friday close  data by TSX & NYSE

TSX ENERGY STOCKS  WEEKLY CHANGE

Husky Energy (HSE) delivered better-than-expected Q1 results on higher oil prices, higher production rates, higher throughputs and better refining margins. Average production decline 2% for the quarter to 334,000 boe/day, blamed on increased maintenance activity. Funds from operations increased 63% to $709 million while free cash flow improved to $325 million. The Sunrise SAGD facility produced an average of 35,800 bbl/day in the first quarter and continues to ramp-up towards its nameplate capacity of 60,000 bbls/day gross. Sunrise is a 50/50 JV with BP.

Encana (ECA) posted a better-than-expected first quarter net profit of $431 million, versus a loss of $379 million for the same quarter last year. The company produced 317,900 boe/day in Q1, weighted about 35% liquids. Natural gas production averaged 1.241 Bcf/day. The company expects to grow production by more than 20% this year, including a ramp up of various Montney facilities later this year.

TransCanada (TRP) reported better than expected Q1 results on good performance from its US and Mexican natural gas business units. Earnings more than doubled from the same time last year due its recent acquisition of Columbia Pipeline. Q1 net profit rose to $643 million, up from $252 million for the same time last year. Revenues rose 36% to $3.39 billion. CEO Russ Girling says the company has $23 billion of near-term projects on the books and expects to grow its dividend up to 10% annually through 2020.

Midstream-player Veresen (VSN) reported a first quarter profit of $37 million. Cash flow improved 28% to $104 million. The company says its Sunrise, Tower and Saturn Phase II projects are tracking ahead of schedule and slightly below budget. Veresen expects Sunrise and Tower will come into service by the end of this year, while Saturn Phase II should be completed early next year.

Pembina Pipeline (PPL) delivered strong first quarter results this week, much improved from the same time last year. The company transported 2.01 million boe/day in Q1, up 11% from the previous year. Revenues rose 46% to $1.485 billion while gross profits increased 60% to $381 million. Pembina's $2.4 billion Phase III pipeline expansion is almost complete and should be in-service by July.

Secure Energy Services (SES) reported a 38% increase in Q1 revenues, rising to $140.7 million. Profits improved to $3.5 million, up from a loss of $10 million for the same time last year. The company's board also approved a 6.25% increase its monthly dividend, now at $0.02125 per share.

Trican Well Service (TCW) reported a Q1 net loss of $49 million including a one-time $52 million change related to a change in share structure at Keane Holdings. Revenues increased 50%, helped by a 17% improvement in operating margins. The company sees strong demand, enabling it to increase pricing by 14% in Q1 versus the previous quarter.

Enerflex (EFX) reported a Q1 profit of $24.5 million, up from a loss of $92.5 million reported in the fourth quarter. Bookings increased almost four-fold from the previous quarter to $319 million. Revenues more than tripled to $354.8 million on improved margins and lower administrative costs.

Enerplus (ERF) reported a first quarter profit of $76.3 million, up from a loss of $174 million for the same time last year. The company produced almost 85,000 boe/day in the first quarter, down 5% due to asset divestitures. Capital spending this year is expected to average $450 million while the full year production guidance is estimated at 81,000 to 85,000 boe/day.

Seven Generations Energy (VII) reported solid first quarter results this week. Q1 production averaged 153,100 boe/day, up 73% from the same quarter last year. Funds from operations hit a record $272 million while net profits increased 56% to $215 million. The company expects to produce 180,000 to 190,000 boe/day this year. Capital spending in 2017 is forecasted to be between $1.5 and $1.6 billion.

Penn West Petroleum (PWE) reported a $27 million quarterly profit versus a loss of $100 million reported for the same time last year. Production declined 55% to 34,900 boe/day due to divestitures of several producing assets. Long term debt at the company is now down 79% y/y to $384 million.

Whitecap Resources (WCP) reported a first quarter profit of $59.5 million as funds from operations almost doubled to $124 million. Q1 production averaged 55,886 boe/day weighted 81% liquids.

ARC Resources (ARC) reported a Q1 net income of $152.5 million, down 15% from the previous quarter but up 80% from Q1/2016. Production averaged 117,611 boe/day, weighted 28% liquids. Production volumes are down 2% from the previous quarter due to recent divestitures of assets in Saskatchewan.

Baytex Energy (BTE) reported an average Q1 production rate of 69,298 boe/day, up 6% from the previous quarter but down 8% from the same time last year. Net income rose to $11.1 million, while funds from operations increased to $81.4 million. 2017 production guidance was tightened to a range to 68,000 to 70,000 boe/day.

Calgary-based Gran Tierra (GTE) reported a first quarter profit of US$12.8 million. Production averaged almost 30,000 boe/day in Q1, up 17% from Q1/2016. The company expects to produce 34,000 to 38,000 boe/day this year.

Bonavista Energy (BNP) reported an adjusted net profit of $11.4 million, down about 50% from the same time last year. Total production declined 4% y/y to 70,281 boe/day, weighted 30% liquids. Funds from operations improved 19% y/y to $71 million.

Cenovus stock (CVE) touched all-time lows this week, last reached in February 2016.

Canadian energy stocks are lagging considerably behind US plays. The value spread between Canadian and US energy stocks is now the widest since 1999.

NYSE ENERGY STOCKS  WEEKLY CHANGE

ConocoPhillips (COP) reported a first quarter adjusted net loss of US$19 million, dragged lower by a US$996 million tax impairment charge from the recent sale of its oil sands and natural gas assets in Western Canada. Excluding Libya, the company produced 1,584 million boe/day, an increase of 2% from the previous year (excluding maintenance outages and asset sales). Q2 2017 production guidance was left unchanged at 1.495 to 1.535 million boe/day. Impacts from its recent sale of oil sands and San Juan Basin assets will be announced after the transactions close later this year.

Devon Energy reported a first quarter profit of US$565 million, much improved over last year's US$3 billion loss. Revenues increased 67% to US$3.6 billion. The company produced an average of 563,000 boe/day in Q1, down 18% from last year blamed mostly on 74,000 boe/day of divestitures. Production from Devon's oil sands operations increased 9% y/y.

Marathon Oil (MRO) reported a first quarter adjusted net loss of US$50 million, excluding a US$5 billion write-down on its Albian Sands operations, recently sold to Canadian Natural Resources. Upstream production averaged 338,000 boe/day. The company expects to produce 340,000 to 360,000 boe/day this year, 6% higher than last year adjusted for divestitures.

Midstream-player Williams Company (WMB) reported a net profit of US$373 million in Q1, up from a loss of US$65 million reported the same time last year. Profits included a US$425 million favourable accounting charge on investment income and sale of joint-venture assets. Cash flow from operations declined 23% to US$606 million.

Profits at BP (NYSE:BP) nearly tripled in the last quarter to US$1.5 billion thanks to higher oil prices and aggressive cost cutting. Operating cash flow rose to US$4 billion in Q1 as production rose 3% y/y to 2.388 million boe/day Capital expenditures averaged US$3.5 billion in Q1, down 22% from the same time last year. The company expects to spend US$15 to US$17 billion this year.

Norway's Statoil (STO) delivered strong first quarter earnings this week. Net income came in at US$1.06 billion for the quarter, up 74% from the same time last year. Q1 revenues rose 54% to US$15.5 billion. Production increased 4% to 2.15 million boe/day. Excluding acquisitions, the company expects to spend US$11 billion in capital this year.

Royal Dutch Shell (RDS.A) reported a blow-out first quarter, as profits increased six-fold to US$3.5 billion. Cash flow from operations rose to US$9.5 billion. The company says it saw notable improvements in its UpstreamandChemicals business and expects to restart its operations in Qatar sometime in the second quarter. Capital expenditures are expected to average US$25 billion this year, which should generate US$10 billion in cash flow by next year. Shell produced 3.752 million boe/day in Q1, up 2% y/y.

Occidental Petroleum (OXY) reported a first quarter net profit of US$117 million, up 50% from a year ago. Production averaged 584,000 boe/day in Q1.

Total's ADR (TOT) hit a 52-week high on the NYSE this week due in part to a strengthening Euro. This week's 52-week lows in the NYSE energy sector include Noble Energy (NBL), Schlumberger (SLB), Occidental Petroleum (OXY) and Apache Corp (APA).

The broader NASDAQ and S&P500 indices hit new all-time highs this week, as well as most European markets.

UPGRADES & DOWNGRADES

Anadarko Petroleum (NYSE:APC): Downgraded from Overweight to Equal Weight at Morgan Stanley, from Outperform to Market Perform at Macquarie and from Outperform to Equal Weight at Wells Fargo.

Bonavista Energy (TSX:BNP): Upgraded from Sector Perform to Outperform at RBC Capital. The company decreased price target from $6 to $5.

Pembina Pipeline (TSX:PPL): Upgraded from Sector Perform to Outperform at National Bank Financial.

Veresen (TSX:VSN): Upgraded from Outperform to Tender at National Bank Financial. The company increased price target from $18 to $20.50.

Royal Dutch Shell (NYSE:RDS/A): Upgraded from Hold to Buy at Societe Generale.